Saturday, November 11, 2017

An attack on BTC may be underway

A dangerous November 16th "SegWit2x" Bitcoin hard fork has been suspended indefinitely according to an e-mail by the organizers who were unhappy that they couldn't persuade the true Bitcoin cultists – which is basically impossible.

However, the widely perceived probability that the fork will take place anyway hasn't dropped to zero at all. The BT2 futures jumped above $300, more than by 50%, in the recent day, while the SegWit2x futures remain above $400. These two probably differ by their behavior if the fork doesn't occur at all. On top of that, a website bitcoin2x.org – which may be just bogus but publicly, nobody is sure – says that a group will proceed with the fork, anyway. And the user nicknamed BitPico has posted a message somewhere claiming that 30% of the miners will work on the SegWit2x fork.

Yesterday, the Bitcoin price dropped from some $7,900 two days ago up to $6,300 before it returned to some $6,600 as of the moment when this sentence is being written. But certain imbalances look spectacular. The number of waiting, unconfirmed Bitcoin transactions has surpassed 100,000. It was 80,000 last night. The number is clearly growing. The transactions are likely to remain "in transit" for days if not forever.

Incidentally, the whole complicated machinery of the Bitcoin – with the computation of the useless difficult computational tasks – is there to prevent double spending of your Bitcoins. Does it mean that it's impossible to double spend Bitcoins, to make your wallet's balance go to negative values? The answer is No. Look at this cute transaction. It says "double spend" instead of a confirmation.

Because the price of the Bitcoin Cash increased by more than 50% in a day, I was reminded of a Chinese plan for an attack translated at Reddit two weeks ago; you may also read the Google Translate version of the Chinese web page.

In the text, the Chinese cryptocurrency expert recommends a combination of the mass sales of BTC combined with a dust attack – flooding of the blockchain with many bogus, usually transactions (this address has made 250,000 tiny transactions, for example, enough for the world's day traffic) – and with mass buying of Bitcoin Cash. Those steps should create panic among the holders of BTC, make them panic sell BTC, persuade the miners to switch to BCH, make the mining of BTC extremely hard, and so on. People should complain about lost coins and they surely do. Lots of transactions haven't been confirmed for 24 hours. A payment system of the future, indeed. ;-) The goal of these efforts is to persuade the majority that either Bitcoin Cash or the new SegWit2x coin is the real Bitcoin.

By the way, I think that yesterday, on November 10th, there was an adjustment of difficulty for Bitcoin. The attackers probably invested lots of mining power before that, so that the difficulty went up. Now some 2/3 of them will leave for Bitcoin Cash which will be more profitable at least through November 13th, slowing down the Bitcoin further. The difficulty of the Bitcoin may only adjust at the end of November again. There may already be a million of transactions waiting in a queue by that moment. ;-)

I don't know what the outcome will be and I am sure that those who repeat the slogan that this is a well-designed and safe payment system or storage of wealth must be living in a different galaxy.